What Is Going On With ESG In America?

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by Eric Burdon
Image of United States Capitol, Washington DC
ESG is simply not embedded yet in American political and social culture (Image by wirestock on Freepik).

With many countries broadly embracing ESG at the national and increasingly cultural levels, the most notable exception is perhaps the United States. Yes, one study places the US at 13th out of 48 countries analysed, but that standing alone speaks to the fact that the US isn’t anywhere near a leadership role in sustainability. Regarded as the economic hub of the world, it’s of some concern that the US doesn’t seem fully prepared to capitalise on a  movement poised to change everything from how we see the world, do business and invest.

With every new turn in the path to sustainability, there is opposition. Several states have put together anti-ESG bills, and some of that thinking has been seen in Congress as well. You also have Florida’s governor, Ron DeSantis, banning ESG in his state. This is especially important since he’s announced his run for president on the platform “Make America Like Florida”. In theory, if Republicans win in the next presidential run, what progress America has made could be significantly reversed.

But despite this massive pushback and Republicans being vocally against ESG, take a look at the public opinion of ESG and you’ll notice a complete disconnect.

What’s seemingly going on with ESG in America is, broadly speaking, nothing. There are complaints from politicians, but with a Democrat-controlled Senate and sitting President, changes are being made. But a swing to the other side could easily spell regression for ESG in America. And yet, the public is seemingly unaware of any of this.

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What The People Think

Even though other governments are ramping up ESG efforts and their people are embracing and understanding what ESG is, we don’t see any of this happening in America. In fact, according to an April 2023 Gallup poll, ESG adoption is proceeding at a snail’s pace. Some particular highlights that this poll found were that:

  • There has been little increase in the public awareness of ESG in the past two years. (40% are not familiar with ESG at all, down from 42% in 2021).

  • Both political parties have admitted they’re not that familiar with ESG as a concept or pay much attention to it.

  • And the Americans who do know about ESG are split on the merits of promoting ESG in business and investing.

In the end, the poll found that while there is a lot of bickering among politicians on some level, the movement is largely left unattended to. It’s interesting considering that the Biden administration, as well as other US official bodies and the UN, have been advocating for ESG for some time.

What few opinions Americans have - positive or negative - largely depend on their political leanings. For Republicans, it’s a negative view, whereas for Democrats, it’s positive. Even so, as this poll points out, a majority of those in the parties don’t talk about this issue or have no opinion of ESG.

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A Deeper Dive

In America, there is huge political turmoil, but setting aside the politics of it all, the Director of Sustainability Research at Sustainalytics, Jon Hale, provides an interesting take on what’s going on with ESG. Seeing the appeal of it in 1995, when it was called “socially responsible investing”, he has devoted his life since then to providing analysis and thoughts on ESG and how it’s evolved over the years.

This past May was his last month working at Morningstar prior to retirment, but he still plans to contribute and discuss ESG moving forward. His interview provides a lot of insight into what exactly is going on in America.

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ESG Affects The Bottom Line

“Some Republicans don’t like it that so many companies are addressing their ESG risks. Companies are taking on issues like their environmental impact, their climate impact, and diversity in the workforce because they connect to the bottom line. These are just facts of corporate management today.”- John Hale

Despite the politicisation of ESG in America, in the business world, embracing ESG has nothing to do with political leanings at all. The reality is that the ones making this political are often media personalities or politicians themselves. That much is clear when you look at Fox News.

Lego created some new characters to represent people with disabilities. They’re woke.

M&M’s character had a design change from go-go boots to sneakers. Fox News had broadcasters slamming the company for this slight change in footwear.

In the end, a lot of these changes, from a business perspective, were to encourage inclusion and diversity, social issues on the ESG spectrum. These are simple changes, but ultimately, businesses know these changes are good because they generally understand, as Hale points out, that ignoring these issues will affect their bottom line.

With ESG, or sustainability, being the name of the game, companies recognise that new investors will emerge and that they will be more sustainably minded. Beyond that, more investors will generally embrace this option or simply not mind having sustainability standards in mind when picking out companies to invest in. 

As a result, businesses know, regardless of the political pushback, a few government officials screaming “woke” at them isn’t as detrimental to them as losing out on a generation of investors who are broadly accepting this movement. Especially outside of America, where ESG is more broadly known.

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More People In America Will Understand It By Default

Ultimately, the American public will receive an awakening on ESG in several regards. Either they’re going to recognise they’ve been practising some form of it, or that it’s already here, affecting companies, and there’s nothing they can do about reversing it.

What resistance we’ve seen with those anti-ESG bills doesn’t amount to much. As people talk about these anti-ESG bills, money managers have stressed that divesting from pension funds would cost pensioners a substantial amount over several years, with the Kansas chief of state pension fund outlining that it would cost $1.14 billion and could reduce the system’s funded ratio by 4.0 percent.

But the more important part is that this movement is generally going to be embraced before long. As Hale brought up, the anti-ESG movement is not going to amount to much. ESG will change more into sustainability, and when people understand the meaning behind it, many are going to realise they’re already supporting this in some sense.

The Supreme Court's overturning of Roe v. Wade is a social issue and has brought forth large crowds in protest over the decision.

The Writers Guild of America going on strike has brought people in to support writers. After all, they are the ones responsible for writing stories that entertain people.

Those two issues alone are social issues with which the American public is becoming more and more familiar. Another big issue is, of course, gun violence, with America the only country 'leading' with this regard globally.

Americans are rightly concerned about these issues and they all encompass, at least in relation to the social aspects of the ESG movement. To eventually learn about it, it’s quite likely people will only be further enlightened about this movement and how it entails other issues. This will especially be the case as more companies continue to release ESG reports and ramp up ESG efforts.

America Is Stalling

Ultimately, America is stalling, and corporations are leading the charge in some capacity. As Hale points out in his interview, businesses don’t want to be ESG “laggards” in this situation and see this as a strategic business move. Regardless of political affiliation or views, turning back from sustainability or ESG doesn’t make business sense.

Between profitability and “political alignment”, businesses are always going to choose the former. And seeing how ESG is already baked into certain systems, turning back would have larger costs on them.

What this all means for the public is with so many charged up on various social issues, the acceptance and understanding of ESG will eventually come by default as businesses work towards their sustainability goals.

Keep track of the laggards and leaders with our rapidly growing listing of ESG ratings and reports.

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